Costly Mangawhai scheme illegal: judge

A High Court judge says Kaipara District Council broke the law when it decided to build and then expand a local sewerage scheme which eventually led to it finding itself tens of millions of dollars in the red.

The Mangawhai Ratepayers and Residents Association took the council to court earlier this year over the decision process that led to the building of the wastewater scheme.

The council, led by then mayor Peter King and chief executive Jack McKercher, had backed the project for the settlement of Mangawhai - resident population 3000 - because of fears the local estuary was being polluted.

In 2006 it was estimated to cost $35.6 million, but without public consultation it was doubled in size and the cost blew out to $57.7m.

The "dysfunctional" and broke council found itself $85m in debt, and not long after it floated the idea of a 31 per cent rate increase for bemused ratepayers, it found itself being run by government-appointed commissioners.

Last year, the auditor-general described it as a "woeful saga" despite the sewerage scheme being a good one.

In a provisional decision highly critical of the council, Justice Paul Heath on Wednesday said the council's decision to enter the construction agreements and major modifications breached the Local Government Act, while the agreements themselves also breached the act.

The association wanted rates paid over seven years declared illegal and paid back, but Justice Heath said he couldn't do that.

He also said the banks that lent the money were also entitled to take enforcement action if the council defaulted on payments.

"At an institutional level, this proceeding has exposed a high degree of incompetence among those who were elected to serve on the council, and also their executive officers."

It had also caused a great deal of stress, anxiety and financial hardship to many residents now paying much higher rates than they should be, he said.

Justice Heath said he would make his final judgment in the case after he has heard more from both sides' lawyers.